Friday, May 27

Capitalism, disrespected

'Capitalism's Bad Rap' in the National Journal notes that many people in government, entertainment, the church, and even in business (particularly in Europe) join the usual suspects of anti-globalization protest in their reflexive hostilitlity to capitalism and free trade ... at least rhetorically.

It is as though the 20th century never happened. Capitalism has delivered hitherto-unimaginable advances in living standards across the developed world. And this is not just measured in dollars and cents. Broader social progress has been made too, again at historically unprecedented rates. Life expectancy, infant mortality, access to health care and education -- regardless of which of these measures you take, capitalism has achieved stunning results.

The 20th century even went to the trouble of testing the alternative -- socialism -- to memorable effect. So it is hardly as if some better economic paradigm is out there waiting to be tried. The one we have has succeeded, in every way, beyond all plausible expectations. Its only rival was a correspondingly egregious failure, ethically and in material terms as well. Given all that, what sustains this steady anti-capitalist sentiment?

Partly, of course, it is that hundreds of millions of people still endure lives, often brief lives, of grinding poverty. Even so, you might think that capitalism would still be recognized -- more than it is, at least -- as the poor's best hope, rather than as the system that holds them back. Poverty is retreating faster than ever before in many developing countries. You can't help but notice that the countries that are opening themselves up to trade and foreign investment -- in effect, to global capitalism -- are advancing the fastest. China is the most conspicuous example. Is capitalism holding China back, keeping its people in poverty? Obviously, just the opposite.

The region whose plight is most desperate is Africa. Here it might seem to make more sense to blame the "global economic system" for keeping the poor in poverty. And in a sense, it is true, because rich-world trade policies do continue to discriminate, scandalously, against exports from Africa. But the plain implication of this is that Africa needs more exposure to trade with the West, not less; more capitalism, not more of some other system, whatever that may be. Increasingly, Africa's own governments are making this point themselves. They want access to Western markets. Where is the chorus of Western demands, in the name of economic justice, for rich-country markets to be thrown open to imports from the world's poor countries? You cannot hear it. It is drowned out by denunciations of sweatshop labor and "naive confidence in free trade."

In the face of the world's recent economic experience, retaining the idea that capitalism is the enemy of social progress, except for those with the power to manipulate the system to their own advantage, calls for an impressive resistance to some large and pretty obvious facts. So the puzzle remains: What is the source of this anti-capitalist sentiment?

After all, that capitalism works as well as it does is, in principle, utterly implausible. How can a fathomlessly complicated system of voluntary exchange, without collective deliberation, with nobody in charge, steered by nobody's good intentions -- a kind of anarchy -- yield social advance, as if by accident? The notion seems ridiculous.

That is why Smith's insight was so remarkable. Good intentions are not required for market forces to produce socially good results. Enlightened self-interest suffices. The result will look as though it had been designed -- as though guided by an invisible hand -- but the reality is otherwise.

Basically, good old fashioned capitalism where honestly applied works wonders and has been an overwhelming force for good. Revolutionary democratic variations of capitalism are essentially lies and are just excuses for revolutionary feudalism.

Equally obviously, capitalism like any human activity needs to be regulated but is far superior to any devised or imaginable form that supposed good intentions or earnest designs have taken. That is why, above all, the regulators need to be kept in their proper place. That future struggle is being defined by the successes of Chinese capitalism today.

One important factor to note is that the critics of capitalism and free trade listed above are already privileged enough to live in the very bosom of both and are unlikely to ever change what makes them rich and comfortable. So many other countries have risen out of poverty and into freedom that it is clear capitalism and its partners such as democracy are human achievements waiting for all to exploit them.

Ethiopians certainly don't have the luxury of swearing off the most successful guarantors of prosperity and freedom ever devised. Tragically, it is their thinkers and leaders that have already done it for them. There is no coincidence that the benefits of the invisible capitalist hand and those of visible democratic hearts and minds always seem to appear in each other's company.